Share Market - Equity

An overview of Stock Equity –

Equities are nothing but shares, which are shares in a company. It means if you buy stocks, you are buying equities. Stocks are raised by company, which are public or private. For an individual investor, only public companies are important.

What are Public companies? A company whose shares can be bought by General Public. Public companies also publish their reports periodically and also readily available to its shareholders.

Private companies are not accepted deposits from outsiders. It does not reveal its finances to outsiders and not issue equity securities. They set their own governance and reporting requirements.

People invest in Equities because they expect high returns. If your stocks get declined then you will lose money. You may also get “Equity” when you join a new company as an employee. It means you are a partial owner of the company. Equity doesn’t pay to fix guaranteed income.

What is Dividend?

A dividend is the share of profits and retained earnings a company payouts to its shareholders. The profit can be reinvested in the business or can be distributed in shareholders. As an investor, you can reinvest your income or take them as income.

The value of dividends is based on a per-share basis. Once the dividend payment is declared, investors received on a specific date which is payable date. The cash dividend is a common dividend which is the actual payment of the cash by the company to its shareholders directly. Most of the public companies usually distribute it every quarter. 

Categorization of stocks -

NSE does not represent categories the stock into groups. NSE has different series, each series represents a certain category.

BSE classified the Equity segment into ‘A’,’B’, ’T’ and ‘Z’ categories.

·         The ‘A’ group companies are the most popular stocks. Companies traded for a minimum of 98% of the trading days in the past 3 months shall be considered eligible. These stocks are actively traded.

·         The ‘B’ group includes stocks which don’t form part of any of the Equity group.

·         The ‘Z’ group stocks are blacklisted not following Exchange rules and regulations.

·         The ‘T’ group stocks are form part of Trade to trade segment. It means no intraday trading is allowed. All trades result in delivery.

 

Different types of stocks -

·         Blue Chip Stocks – Mostly large companies are involved. Safe investment and are not highly volatile. Dividend payment stocks which received quarterly.

·         Growth Stocks – Grow at a rate significantly above the average growth. Not paying dividend. It looks so expensive.

·         Penny Stocks – This type of stocks which attracts minimal pricing. They trade at low pricing have very low market capitalization.

 

Advantages and disadvantages of Equity shares –

 Advantages –

•       Equity share holders have voting rights
•       The rate of dividend on equity capital depends upon the availability of surplus funds.
•       This share capital remains permanently with the company.
•        In case of profit, equity shareholders received increased dividends and appreciation in the value of shares.

Disadvantages –

• .      Not assured of regular returns. It depends upon company business. If company shows good results, then share value may appreciate.
• .      Both the income and capital gain is uncertain in these investments.
  
  

Tips for Investing –

1.      If you are new in the share market don’t know about the shares then do not invest directly. Analyze the particular shares, past history of the shares, company performance otherwise take help of financial advisors. They analyze your financial situation and invest accordingly.

2.      Diversify your assets across other securities like bonds, options, mutual funds. It’s a risk-taking business hence not investing whole money in share market, keep some backup invest in safe and stable schemes like banks, or post office.